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Appraisal Update – September 2018

If any of you have questions during the month, please feel free to email me or call and I will be glad to personally respond. If the topic is of enough interest, I will be glad to expand it and include it for the next monthly update.

Our DFW market is retiring to a more typical or normal flow. We are finding more seller concessions, more seller price reductions and more inventory with increased sales times. The market is slowing and has clearly passed the crazy bidding frenzy which occurred the past couple of years.

The following are some recent published articles which reflect our market feedback. Steve Brown in the Dallas News as well as some of our national publications reflect this trend. Additionally, the price increases, especially in the entry level ranges are affecting buyer’s affordability.

In turn, an interesting article reports the real estate values of Dallas approach that for the total nation of Sweden. It is hard to imagine the dynamics of the DFW and the USA market and this places a new perspective into focus.

ALSO, the Fannie Mae 1004MC was announced to be discontinued at the end of July and now, at the end of August Freddie Mac is following suit.

Dallas-area home prices grew by the smallest percentage in almost six years in the latest national housing report.

Dallas prices were up only 5.2 percent from a year ago in the just-released Standard & Poor’s/Case-Shiller Home Price Index. That’s less than the 6.2 percent nationwide home price gain from June 2017.

North Texas home price increases have been decelerating in recent months as the supply of houses for sale has grown and purchases have slowed.

The current rate of Dallas area growth is still slightly ahead of the area’s 4.2 percent average growth for the last decade in the Case-Shiller Index.

Home appreciation rates in Dallas-Fort Worth are running at about half of what they were 18 months ago.

“Home prices continue to rise across the U.S.,” S&P’s David M. Blitzer said in the report. “However, even as home prices keep climbing, we are seeing signs that growth is easing in the housing market.

“Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets.”

North Texas preowned home sales are up only 2 percent so far in 2018 compared with the first seven months of 2017.

The biggest year-over-year home price gains in June were in Las Vegas, up 13 percent, and Seattle, up 12.8 percent.

“The West still leads the rise in home prices, with Las Vegas displacing Seattle as the market with the fastest price increase,” Blitzer said.

Prices were up 10.7 percent in San Francisco and 7.4 percent in Los Angeles.

Among the 20 major U.S. markets that the Case-Shiller report tracks, home prices in June were about 3 percent higher than at the last peak, in 2006 before the Great Recession.

Dallas-area prices are about 45 percent ahead of where they were before the economic downturn and housing crash of a decade ago.

Case-Shiller’s index tracks the prices of preowned single-family homes in each metropolitan area. It does not include condominiums and townhouses or new construction.

“It’s hard not to notice the winds beginning to shift in the housing market,” Zillow chief economist Aaron Terrazas said in response to the new Case- Shiller numbers. “But those changes have yet to reach the point where they’ve fully transitioned from homebuyer headwinds into tailwinds, and likely won’t until at least the end of the decade.”

“The truth is, we aren’t witnessing a rapid shift in market power, but rather a slowly unfolding evolution in which things are changing from extremely competitive for buyers to only somewhat competitive,” he said. “Sellers, for now and for the foreseeable future, are still in control in this market.”

Twitter: @SteveBrownDMN

Dallas ranks with GDPs

City’s housing value is comparable to an entire nation

By KAREN ROBINSON- JACOBS Staff Writer krobinson@dallasnews.com

REAL ESTATE

If you happened to have half a trillion dollars, would you buy every residential property in the Dallas area or set your sights on owning, say, Sweden? Neither’s really an option, but a new study sets up a comparison between U.S. residential real estate values and the gross domestic product of many countries. The conclusion: Taken collectively, the value of residential real estate in most major metro areas of the U.S. outstrips the GDP value of many nations.

Ninth-ranked Dallas, with a residential value of $549 billion, is the equivalent of Sweden’s GDP.

LendingTree, an online loan marketplace, analyzed the value of single-family and multi-family homes, including condos and co-ops, owned by individual households, excluding those owned by a business entity.

LendingTree used real estate values in its own property values database, which includes data on more than 155 million U.S. homes.

The total value of residential real estate in U.S. metropolitan areas listed in the database was $26.2 trillion in late June. By comparison, the Federal Reserve’s estimate of the total real estate owned by households and nonprofits was $28.4 trillion at the beginning of this year.

The LendingTree study then compared the residential values to global GDP figures.

The comparison is not apples to apples: GDP represents a single year’s output of goods and services. Home value is based on a raft of factors, including the economy and location, location, location.

The study looked at metropolitan areas because that’s where real estate wealth in the U.S. is largely concentrated.

Not surprisingly, New York had the most valuable real estate in the U.S. at $2.5 trillion — just about on par with France’s entire GDP in 2017.

Los Angeles was second at $2.2 trillion, equivalent to the GDP of Brazil. San Francisco was third at $1.2 trillion, equivalent to Mexico’s GDP, the study said.

Dallas placed just behind Seattle but ahead of San Jose.

The San Jose comparison is interesting if you look at the big difference in the median prices listed in the study: $213,000 for Dallas, $1.07 million for San Jose. (Last month, Zillow listed the median home value in the Dallas- Fort Worth-Arlington metro as $231,100.) The least valuable residential real estate was found in Beckley, W.Va., sometimes called the “Smokeless Coal Capital,” with real estate valued at $189 million.

For about that same amount of money, you could buy a super swanky home in Los Angeles. A manse at 924 Bel Air Rd. in Los Angeles is listed at $188 million.

Twitter: @krobijake

Appraisal:

Freddie Mac Officially Eliminates 1004MC Requirement

By: Dan Bradley August 30, 2018 On August 29, Freddie Mac released Bulletin 2018-13 which officially confirmed what almost everyone had already suspected—they are followingFannie Mae’s lead in eliminating the requirement for appraisers to include the 1004MC (Freddie Mac Form 71) as an attachment to appraisal reports.

In the Bulletin, Freddie stated: “As part of our appraisal modernization efforts, we are no longer requiring that Form 71, Market Conditions Addendum to the Appraisal Report, be provided with all appraisal reports. The expected scope of work is not changing as the appraiser is still required to perform the analysis necessary to report and consider neighborhood and market conditions. If Sellers continue to require the use of Form 71, we will accept the form and there will be no operational impact.” [Note: the term “Sellers” refers to originating lenders who sell loans to Freddie Mac, not property sellers.]

For appraisers, the two most important things to note are:

Freddie still expects the appraiser to perform analysis of the neighborhood and market conditions.

Lenders may still require appraisers to use this form if they wish.

There is no word yet regarding whether HUD/FHA and VA plan to remove their requirements to use the 1004MC.

Starter-Home Affordability Hits a Decade Low

In the second quarter, first-time buyers needed almost 23 percent of their income to afford a typical entry-level home, up from 21 percent a year earlier.

(Bloomberg)—Here’s why the U.S. housing market is cooling: Prices are just too high.

Starter homes are now more costly to purchase than at any time since 2008, when the last boom came to a crashing halt. In the second quarter, first-time buyers needed almost 23 percent of their income to afford a typical entry-level home, up from 21 percent a year earlier, according to an analysis by the National Association of Realtors.

The property market, after years of price gains that outpaced income growth, is showing signs of slowing as sales decline. The affordability crunch is especially severe at the low end of the market and in hot areas where supplies are tightest and values have risen most. A jump in mortgage rates this year only made it worse.

“When prices go up at the entry level, that’s where the affordability issue is most acute,” Charles Dougherty, a Wells Fargo & Co. economist, said in a phone interview. “People are hesitant to stretch the amount they’re willing to pay.”

The most expensive U.S. markets include San Francisco and New York, where the median household needed about 65 percent of its income to buy a home in the second quarter, according to an analysis from Trulia. The share was 59 percent in Los Angeles and 55 percent in Miami.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net Christine Maurus